Keyblast.com: How to Budget

In this lesson we will cover mortgage basics, mortgage calculators, and debt consolidation. Mortgages are a fact of life for most people.  If you are going to own a home, you will probably need a mortgage.  The word mortgage is derived from the French word “Morta” meaning death; or payment until death!  It sounds depressing, but it doesn’t have to be.  

Don’t Rush In to a Mortgage (estimated savings - possibly a million dollars) Buying a home is HUGE investment.  The type of mortgage you get can make your life wonderful or a living nightmare.  A few percentage points on a mortgage can really damage your financial future.  For example, notice the three interest rate options on a $200k mortgage below:           

         $200k Mortgage          6.00%              7.00%                8.00%

• Monthly Pmt               $1,199.10            $1,330.61          $1,467.53
• Total Paid                   $431,676.00        $479,017.80      $528,310.44 
• Total Interest             $231,676.00        $279,017.80      $328,310.44

This chart shows the monthly payments, total paid, and total interest paid on a $200,000 30 year mortgage at 6, 7, and 8%. As you will see by looking at the numbers above, a small change in your interest rate can make a HUGE difference.  On an 8.0% mortgage you will not only pay $268.43 more each month (compared to 6%), but you will also pay $96,634.40 more over the life of the loan. You would also miss out on saving and investing this $268.43. 

Now if you remember our lesson about Time Value of Money, you already know that $268.43 invested each month over 30 really adds up.  In fact, by taking the 268.43 you would have saved by having a lower interest rate over 30 years; you would have accumulated $938,153.22! As you can see, the true cost of getting a higher interest rate mortgage is much more than $96,634.40.  In fact, the $268.43/mth invested at 12% over 30 years will actually grow to $938,153.22!  This is nearly a million dollar decision! Hopefully, this example illustrates how much a mortgage could really cost you.  So, don’t rush in - it could literally be a million dollar decision.

Shop Around If you decide you need to get a mortgage, shop around.  As a minimum, you should get at least 2 quotes.  You should never rush in and take the first offer that you get.  In fact, it is best if at least one of the mortgage quotes that you receive is from a mortgage broker.  A broker is able to research many lenders and find the best offers available.

In fact, with so many things being done online; it is even easier to see if you have the best interest rate possible.  For example, Lending Tree is a very reputable online mortgage broker.  With a simple online application, you can search rates offered from dozens of companies. 

If you currently looking for a mortgage, or if would like to see if you can get a better rate on your existing mortgage, try the Lending Tree no-obligation quick quote system below:

Do the Calculations Yourself In addition to shopping around for the best mortgage interest rate, it is important to do some calculations yourself.  We have provided a free mortgage calculator. We have also provided a link to this mortgage calculator on our homepage. This calculator is for fixed rate mortgages only. This calculator allows you to see what happens when you raise or lower your interest rate, get a more expensive home, or change the length of the loan. Take a few minutes and see what your finances would be like if you were to lower your mortgage payment.

Continue >> Debt Consolidation

Keyblast.com offers a free financial course to help improve personal finances.  If you have not done so already, please start from the beginning and learn How to Budget.